EU renews work on plan to use frozen €200 billion in Russian assets, with proposal to move funds out of Belgium

The European Commission has restarted discussions on utilizing frozen Russian central bank assets held across Europe, according to a recent Financial Times report. One proposed solution involves setting up a distinct entity to safeguard around €200 billion in frozen Russian assets, currently managed by the Belgian securities depository Euroclear.

In August, four EU nations addressed the European Commission in a letter encouraging the revival of efforts to explore ways to utilize Russian assets to aid Ukraine. Germany is currently spearheading the push for a resolution to the issue surrounding the Russian funds. The renewed focus on frozen Russian assets stems from Ukraine's escalating defense expenditures and deliberations regarding the EU's upcoming long-term budget for 2028 to 2034.

European officials express the primary hurdle in crafting a proposal that satisfies Belgium, which has previously obstructed similar initiatives. Belgian authorities are apprehensive that employing the assets to support Ukraine could expose Brussels to potential legal repercussions, with Moscow potentially initiating a lawsuit. Belgian officials insist that any proposal involving frozen Russian assets must offer a comprehensive and legally sound resolution covering both the assets and the liabilities of Euroclear and the Belgian State.

A joint proposal proposed by former German Defense Minister Annegret Kramp-Karrenbauer and French MEP Nathalie Loiseau suggests establishing a separate EU framework to hold the Russian funds presently stored at Euroclear. Some European officials believe this approach could provide Belgium with the essential assurances against legal risks.

Sweden, the Netherlands, Spain, and Poland had previously urged the European Commission to recommence work on identifying methods to employ Russian central bank assets for Ukraine's advantage. In a letter to EU Foreign Policy Chief Kaja Kallas, they emphasized the need for Ukraine to receive additional financial backing in both the short and long term.

By leveraging the immobilized assets, the EU could ensure that Russia compensates for the devastation it has caused in Ukraine promptly, while simultaneously alleviating the tax burden on their citizens. Germany is now leading the coalition of countries advocating for a swift resolution. Among the proposals under discussion is a new loan for Ukraine backed by the frozen Russian assets.

Euroclear recently transferred €6.6 billion to Ukraine from proceeds of frozen Russian assets, prompting the company to hire security personnel for its executives due to concerns about potential threats. The European Central Bank has filed a lawsuit in Luxembourg challenging the freezing of Russian assets in the EU.